FMC dismisses MSRF’s complaint against HMM

PHILADELPHIA : The US Federal Maritime Commission (FMC) has thrown out US gourmet food producer MSRF’s complaint against South Korean liner operator HMM.

In June 2022, MSRF complained against HMM and Taiwanese liner operator Yang Ming Marine Transport to the FMC, accusing them of contravening their contractual obligation to provide the requisite shipping capacity in 2021 and 2022, when the container shipping market experienced tight capacity during the Covid-19-fuelled boom.

In its complaint, MRSF noted that China-US West Coast freight rates shot up nearly 10-fold since 2019, from US$2,700/FEU to US$25,000/FEU.

MRSF said that shippers have been forced into an artificially inflated spot market and accused HMM and Yang Ming of refusing to fulfill the minimum slot quantity commitments specified in their contracts. This allegedly pushed MSRF to buy space on the inflated spot market, which resulted in them suffering damages of over US$2.2 million.

While Yang Ming settled the dispute with MSRF privately in August this year, FMC judge Linda S. Harris Crovella found on 22 November that HMM went beyond the minimum required of its contractual obligation of two container shipments a month.

Judge Crovella wrote, “None of MSRF’s claims are successful. MSRF entered into a service contract with HMM, which was amended 14 times, yet MSRF’s claims primarily rely on the service contract as originally enacted, prior to the amendments. Many of the 14 amendments were at the initiation or for the benefit of MSRF, including the addition of shipping lanes and the continuation of 2021 prices during the contract extension. The duration of the service contract was extended by amendment, and through the end of the contract, HMM carried almost double the minimum quantity commitment of cargo.”

The initial contract ran from 1 May 2021 to 30 April 2022 and required HMM to carry 25 FEUs from Asia to the US, and worked out to no more than two container shipments a month. During this time, with difficulties obtaining shipping slots, Judge Crovella found that MSRF had requested amendments and extensions to the contract, resulting in it ending on 8 July 2022.

In addition, HMM had informed MSRF of its “extra loader” Transpacific services and asked the shipper if it would like to take advantage of the ad hoc sailings, to which MSRF agreed. Over the whole period, HMM shipped over 46 FEU for MSRF, substantially above the company’s contractual obligation.

While MRSF claimed to have suffered US$1 million in damages, Judge Crovella found it had not proven any wrongdoing on HMM’s part.

She wrote, “Taking into consideration the arguments of the parties and the facts particular to this case, MSRF has not established that HMM unreasonably or unjustly refused to deal or negotiate.”